LONDON (REUTERS) - China exported 4.65 million tonnes of steel in January. It sounds like a lot of steel and it is, equivalent to what the Czech Republic, the world's 33rd-largest producer, churned out over all of last year.

Everything about China's steel sector comes in scaled-up size. It is, after all, the world's dominant producer, accounting for just short of half global production.

In the context of the last few years, however, those January exports were startlingly low. It was the smallest monthly outbound flow since February 2013.

Exports fell by 30.5 percent last year and the trend appears to be accelerating. January's exports were 36.6 percent off last year's pace. The period of peak Chinese steel exports is now past.

Unfortunately for China, and quite possibly everyone else, it will probably be too little too late for US President Donald Trump. The US Commerce Department's "Section 232" report on US steel import dependency gives him wide powers to penalise imports on national security grounds. His decision could come as early as Thursday. The mood music from Washington has not been conciliatory.

China was once a big exporter of steel into the US market. But as of last year it ranked only the 11th-largest supplier. US imports of Chinese steel have fallen 31 percent since 2011, according to the Section 232 report. That may have something to do with the 29 countervailing and antidumping duties currently imposed on Chinese steel products. None, by the way, will be impacted by any Section 232 action.

China features explicitly in only one of the Commerce Department's proposed measures for raising US domestic steel capacity utilisation from 73 percent to a targeted 80 percent. It is one of 12 countries that could be hit with a minimum 53 percent tariff on all imports. The Commerce Department's two other proposals envisage blanket tariffs and/or quotas on imports of all products from all countries.

But make no mistake. This is all about China. Everyone else is caught in the crossfire.

China's build-out of steel capacity, particularly after the global financial crisis, has been phenomenal in scale. From 278 million tonnes in 2003 it had mushroomed to 1.12 billion tonnes in 2016, according to the Commerce Department. But the steel boom was laced with over-exuberance, meaning too much capacity even for China's huge appetite.

When China's post-crisis construction pulse faded in 2015 and 2016, the country exported over 100 million tonnes of steel each year. And that really is a lot of the stuff, more than the annual output of Japan, the world's second-largest steel nation. The main destinations for the export flood were South Korea, Vietnam and the Philippines.

Steel, however, is an amorphous alloy and such powerful surges merely displaced similar steel in receiving countries, which sent waves of their own exports to other markets that in turn washed up on US shores. This issue of global, for which read "Chinese", steel overcapacity has been on the political agenda for years and in December 2016 the G20 countries launched the "Global Forum on Steel Excess Capacity" in an attempt to find a multilateral solution.

The forum's November 2017 report "provides helpful policy prescriptions (but) it does not highlight the lack of true market reforms in the steel sector", according to the Commerce Department.

The next sentence, unsurprisingly, begins with the word "China". But with China's direct trade with the United States now much reduced, if Washington wants to take unilateral action against China, it's almost inevitable that others will get hit as well. The lobbying for exemptions has already started.

Just as the world girds itself for steel-lined trade wars, the cause of all this unhappiness is fast receding. Lower exports are the manifestation of a multi-pronged restructuring of the Chinese steel sector.

Faced with calls to cut capacity, Beijing has done just that. The Chinese authorities have shut down 115 million tonnes of steel capacity over the last two years and are confidently predicting they will hit their 2020 target of 150 million tonnes this year. Another 140 million tonnes of induction furnace capacity has been eliminated. Much of it was operating without official licences, existing as a shadow steel stream outside of any national production figures, a major headache for steel statisticians. The US Commerce Department argues that "the setting of capacity reduction targets is not a long-term response to the crisis".

However, the short-term effect in China itself has been massively beneficial, lifting steel prices and margins and refloating sinking balance sheets. Producers have been piling up the cash, quite literally in the case of Jiujiang Steel in Jiangxi province, which delivered 278 million yuan ($44 million) in three and a half tonnes of cash to its main office to pay employee bonuses. And the short-term effects on the rest of the world have also been beneficial. While deadweight capacity has been eliminated, China's domestic consumption has been robust, translating into two years of ever-faster falling exports.

The big question is whether Chinese steel exports will continue sliding. Right now, China's domestic supply dynamics are positive but with an analyst consensus that construction activity, one of the core pillars of steel consumption, will fade in 2018, exports might accelerate again as the cycle turns. But that's without factoring in China's "war on smog".

Steel has been one of the industrial sectors required to idle capacity in the region around Beijing over the "winter heating season". Affected producers might reasonably be expected to ramp up output just as fast as they can as soon as the directive ends in mid-March. Except that now the citizens of Beijing have seen a marked improvement in air quality, they understandably want more of it.

Even as Beijing draws up plans for more curtailments next winter, cities such as Tangshan are thinking of making them semi-permanent. This is a structural, not cyclical, change to China's steel footprint. When it comes to steel versus air, air is winning. None of which is going to count for much with a US president who has promised to support domestic steel producers.

But the reality is that Chinese steel production, factoring in all that "invisible" induction furnace stream, has peaked. Much more significantly for the global steel market, the country's exports have peaked as well. Shame about the timing.